Corporate Services Blog

Tax Relief for Special Economic Zone in India

02/01/2014

The Indian government has announced that it is to exempt from service tax a number of services received by units which are located in a Special Economic Zone (SEZ), this will include an exemption from all indirect taxes for authorised operations. Developers will also benefit from these tax reliefs providing that it is for permitted activities within the SEZ’s.

This exemption will be in the form of a refund of service tax already paid on the specified services. The unit or developer will need to complete the relevant declaration forms and retain receipts related to the services received. It should be noted that a refund claim must be filed within one year from the end of the month in which the original service tax payment was made and that only one refund claim can be made in each quarter. You can opt not to use this exemption choosing instead to apply for a Central Value Added Tax credit on the services received.

This is very different from the decision finance minister P Chidambaram made in March when he turned down the commerce department’s request that the minimum alternative tax (MAT) be cut. The commerce department had argued that the production in SEZ’s were meant for exports and would help increase shipments out of the country so were good for the economy. So the new announcement regarding extended tax relief to companies providing services from the tax-free export zones is very welcomed.